John Allison, BB&T Bank, and Moral Philosophy

Good strategy is based on a shared mission. In Sun Tzu's strategy, a philosophy is a set of higher values. Businesses always forget that the highest missions are based on a moral philosophy.  This is the story of  John Allison, the longtime CEO and current Chairman of the Board for BB&T Bank.  National Review did a story on how his philosophy allowed his bank to stay out of the troubles most finanicial institutions got into during the sub-prime and bailout eras.  Quoting from it:

“We didn’t do negative-amortization mortgages,” Allison told NRO, “and to the degree we’ve had more successes, I believe it’s because we’ve had a long-term integrated philosophy. We’re very much a principle-driven organization, and those principles we adhered to in the good times and the tough times are an example of the reason we didn’t do the negative-amortization mortgages.” Further, it’s worth noting that while troubled banks went looking for handouts, Allison slammed the government bank-bailout program.

The fact that BB&T didn’t dive head-first into the shallow pool of subprime mortgages certainly goes a long way toward explaining the relative health of BB&T as an institution. But how was BB&T able to resist chasing after all that new mortgage money?

The answer is simple: Subprime mortgages were bad for the people who took them out. That went against BB&T’s philosophy — not for reasons of altruism but because it would have been poor strategy. “We’re obviously a for-profit company, but we don’t think that it’s good business in the long term to do bad things to your clients, even if you make a profit doing it,” Allison said. “So we chose not to do negative-amortization mortgages because we knew it was going to get a lot of people in financial trouble.”

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